Edited version of private advice

Authorisation Number: 1051930148221

Date of advice: 6 December 2021

Ruling

Subject: CGT - active asset test

Question

Do the storage units satisfy the active asset test under section 152-35 and 152-40 of the Income Tax Assessment Act 1997?

Answer

Yes. Having considered all circumstances and the relevant facts, it is accepted that a tenant/landlord relationship does not exist between the trust and the clients using the storage units. Therefore, the amounts received by the Trust are not considered rent. This means the property will satisfy the active asset test for the purpose of the small business CGT concessions.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

In 20XX, the trust issued four units at $1 each to four separate individuals. They have not changed ownership.

In June 20XX, the trust purchased land.

Storage units were built approximately 12 months later.

The property contained X storage units.

The storage units were leased on a week-to-week basis and managed by a real estate.

As the owner of the property, the trust was responsible for:

•         organising building repairs and maintenance

•         landscaping

•         rubbish collection

•         cleaning of units and business property

•         organising check on payments and credit references

•         managing security

•         managing income and expenses

•         removing items left on-site from previous clients

•         compliance with the City Council

•         customer relationship management.

The property was sold in the 20XX income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 152

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Section 152-10

Income Tax Assessment Act 1997 Section 152-35

Income Tax Assessment Act 1997 Section 152-40

Income Tax Assessment Act 1997 Paragraph 152-40(4)(e)